Dynamic compression with dynamic multi-stage encryption for a data storage system in accordance with the present description includes, in one aspect of the present description, preserves end-to-end encryption between a host and a storage controller while compressing data which was received from the host in encrypted but uncompressed form, using MIPs and other processing resources of the storage controller instead of the host. In one embodiment, the storage controller decrypts encrypted but uncompressed data received from the host to unencrypted data and compresses the unencrypted data to compressed data. The storage controller then encrypts the compressed data to encrypted, compressed data and stores the encrypted, compressed data in a storage device controlled by the storage controller. Other aspects and advantages may be realized, depending upon the particular application.